Hunting for Big IPO Game
Already-Dominant Morgan Stanley Tech Team Sets Sights on Facebook Deal
By ANUPREETA DAS
Last year, Morgan Stanley's technology bankers got wind that some directors of Pandora Media Inc. were wary of hiring the bank to lead the online radio company's public offering.
Michael Grimes, co-head of global tech banking at Morgan Stanley, and his team wore concert T-shirts of their favorite bands from their Pandora profiles, including the Rolling Stones and Black Sabbath, under blue blazers when making their pitch. A person present at the meeting said Mr. Grimes assured Pandora that his team only makes suggestions to clients and doesn't dictate what they should do. The bank got tapped for the deal.
![[MSFACE]](http://si.wsj.net/public/resources/images/MI-BN228_MSFACE_DV_20120124190434.jpg)
Bloomberg News
Michael Grimes of Morgan Stanley
Now, with the chance to lead the much-anticipated IPO of Facebook Inc., Morgan Stanley's tech team is going after a much bigger prize. The offering is expected to raise as much as $10 billion in what could count as one of the largest U.S. public debuts ever.
For the past year, Morgan Stanley and rival Goldman Sachs Group Inc. have been viewed as leading contenders for the coveted "lead left" spot in Facebook's IPO prospectus, which goes to the bank with the most responsibility for the offering. Goldman was presumed to have an upper hand after arranging a private offering of Facebook shares last year, though its odds were seen as declining amid a flub in that process that led the bank to limit the deal to non-U.S. investors. After that, executives at the social-networking company became less enamored with the bank, according to people familiar with the matter.
Morgan Stanley and Goldman Sachs declined to comment.
Often referred to as a boutique inside a big bank, Morgan Stanley's tech team helped take public roughly half of the 23 Internet companies that listed in the U.S. last year, according to Dealogic. It ranked tops for global and U.S. Internet and technology initial public offerings last year.
The $115 million it made in fees for U.S.-listed Internet IPOs last year was nearly twice the amount earned by its nearest competitor in terms of fee revenue, Deutsche Bank AG.
Facebook is expected to file initial documents for its offering soon. Bankers—who help companies decide how to price shares, tell the company's story and allocate shares to investors—have been waiting for word that they will get a role. Together, these financial advisers are expected to reap fees of as much as $220 million from the Facebook deal, though the company could negotiate lower fees because the deal is such a trophy.
The tap from the social-networking company to lead the deal could prove a boost for Morgan Stanley, which, like many of its rivals, has been struggling amid an upheaval in the trading operations and new regulations that have crimped profits.
The tech team's importance to Morgan Stanley came through during the bank's recent cost-saving moves. Though the firm laid off 1,600 employees in recent weeks and slashed bonuses for many others, its tech bankers are largely going to be spared, according to a person familiar with the matter.
Beyond fees, a thriving IPO business can help a bank attract brokerage clients and win business advising on mergers.
A lead role in a deal can put a bank in a prime position to get wealth-management business from newly enriched company employees.
For Morgan Stanley, a Facebook coup also could prove a boon for retail brokers and clients of Morgan Stanley Smith Barney, the brokerage joint venture Morgan Stanley owns with Citigroup Inc.
Clients say one plus for Morgan Stanley's team, based in Menlo Park, Calif., is that it has been largely unchanged since the mid-1990s, after veteran deal-maker Frank Quattrone left for a rival shop in 1996, taking with him a team of bankers. The 45-year-old Mr. Grimes, who had joined a year earlier, helped rebuild Morgan Stanley's tech team through the dotcom boom and bust.
In 2005, Mr. Grimes was appointed a co-head of global tech banking, along with Paul Chamberlain, 48, another veteran of the bank.
"They've been in the same jobs, not leaving for other firms, not moving to New York, they've decades of experience and seen every tech cycle… that carries a lot of weight with clients," said Egon Durban, a managing partner at private equity firm Silver Lake Partners.
While Wall Street banks often group coverage of telecommunications, media and technology together, Morgan Stanley breaks out tech separately, which clients say gives the Morgan Stanley team focus.
At Qlik Technologies Inc., Lars Bjork, chief executive of the business-software company, said two Morgan Stanley bankers came calling on Qlik about five years before the company's 2010 IPO, long before their rivals. "There was no shortage of bankers," so when it came to choosing the lead underwriter, it boiled down to "who is spending enough time with you and knows you so well that they can tell your story as well as you can," Mr. Bjork said.
Morgan Stanley's track record isn't perfect. LinkedIn Corp. shares more than doubled on their first trading day, raising questions whether the bank had underpriced the company's stock. The opposite question has hovered around online game developerZynga Inc., whose stock price has largely remained below its $10-a-share initial offering price.
Mr. Grimes, a fast-talking and energetic California native with a degree in electrical engineering and computer sciences, is known to clients and colleagues as being passionate about technology—someone who Is never too busy to drive over to meet a young client for coffee, according to a former colleague. "He has a love of the game, and it comes through," the person said.
Clients say they appreciate the personalized attention they get. Early last year, Mr. Grimes flew around the country with Michael Smerklo, chief executive of software company ServiceSource International LLC, to meet potential investors before the company's IPO, said Mr. Smerklo, himself a Morgan Stanley banker a dozen years ago. When the stock popped 22% on the first trading day, "we were thrilled," he added.
—Aaron Lucchetti and Randall Smith contributed to this article
Write to Anupreeta Das at anupreeta.das@wsj.com
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